The 'Android Runtime' is probably not located on top of the libraries, because it does not totally build upon them. The DalvikVM is a VirtualMachine that is running on Linux and not essentially on the libraries.

Actually it's both locate beside the library layer and on top of the library layer. Probably because developers also have access to SQLite, Opengl, ... I believe these libraries aren't really a part of the Dalivik core libraries, although we access them through Java, but these calls are probably only bypass calls, directly to the underlying libraries.